I dont think CVA can be perfectly hedged but I forget other choicesThere was also a question on credit lines and CVA. I chose the one saying that CVA can be calculated in advance and therefore fully hedged.
I dont think CVA can be perfectly hedged but I forget other choicesThere was also a question on credit lines and CVA. I chose the one saying that CVA can be calculated in advance and therefore fully hedged.
Can the answer possibly be 'exponential'? I debated between Lognormal and Exponential and picked "Exponential".It was for severity and most certainly lognormal.
CVA aims at minimizing the number of counterparty in order to maximize the netting benefit. In contrast, credit limit aims at maximizing the number of counterpartyI dont think CVA can be perfectly hedged but I forget other choices
FVA is related to funding cost adjustment. It is controversial for traders to account for the funding value adjustment in their P&LAnother one on FVA
The market price is lower than the model price given the OAS is positive over the treasury spot curveSome others coming to mind, apologies for the vagueness but maybe others can extend more detail:
And unless I am just forgetting about it, I was surprised to not see any Merton / contingent claim questions...
- CHF/EUR de-peg from January event and a complimentary graph I think I chose the answer where one currency will be more volatile going forward.
- Something regarding an OAS spread above the treasury curve +30 and below the Securities spot curve -30 bps, and the implications on security value or market perception.
- A question where you had to distinguish and/or choose between age/volatility/filtered/correlation weighted approaches.
- Four hedge fund strategies with similar market conviction, which would be least likely to be correlated with the others. For me it came down to short bias or market neutral, I chose the latter.
- Pick the answer which best describes "Pillar 3"
- I recall performing the ROE calculation for some reason, or I am imagining this lol.
There are others going through my head, but I am not sure if I am just blending them with past practice questions, it's becoming hazy at this point.
I will refrain from adding more questions I recall to this discussion, for my own sanity. The analysis I'm doing at this point is slightly driving me up the wall. I need to let go and know that worst case I did not make the cut, I can continue studies and be even more prepared and a better risk manager with deeper knowledge of the subject matter, which I found quite interesting especially for part 2. It would not be the worst fate. However, if I pass I will certainly miss all the learning and challenges that come with this curriculum. It can be an incredibly frustrating and painful journey, yet so uplifting and totally worth it when you experience each "Ah hah" moment and small victory along the way. Best investment of my time I ever made.
Thank you David and BT team, and I wish you all the very best of luck!
Ryan
I think lognormal will be more appropriateCan the answer possibly be 'exponential'? I debated between Lognormal and Exponential and picked "Exponential".
1. VaR = 37kLiquidity adjusted VaR was around 35k or sth? (really can't remember but straightforward question)
add me, I did do this, good luck to usI believe your solution is correct. I think though that the the spread was 420 basis points, therefore hazard rate 0.07 and right answer is 13%. I think the rest of the answers were significantly smaller percentages (i.e. less than 8%). Can you remember? (As your answer gives 14.2%)
I don't know when to study that Basel used for exponential log ??????? however I answered lognormal (imaged on certain wordings of Basel used lognormal better than ....) good luck to usI think lognormal will be more appropriate
i faced the same problem as well and was doubting if the none of the answers was correct because i obtained:add me, I did do this, good luck to us
I think all the answers were wrong. Everyone should get the same credit for this question.i faced the same problem as well and was doubting if the none of the answers was correct because i obtained:
1- e ^ (-0.042*2/0.6) = 13.05%
However, the answer provided in the question was 13.5% and the rests were much lower than this percentage....
Either GARP made a typo or I worked in a wrong way.
I remember Basel saying that Exponential is appropriate above high thresholds in a severity distribution where the losses are independent of that high threshold where risk factors are not easily identifiable or data available. Lognormal can model such amalgamated parameters so is appropriate, in general, for severity. Not that I know the exact science behind all of this, but thats what i read anyway.I don't know when to study that Basel used for exponential log ??????? however I answered lognormal (imaged on certain wordings of Basel used lognormal better than ....) good luck to us
Nope its not steeper as opposed direction , I just know this is not steeperThe first question was copied from GARP 2013 about QQ plot
I forgot which one I selected but I thought this is not mbs caused no funding liquidity issuewhich are the most challenging for bank to model interest rate risk and funding liquidity risk?
MBS, covered bond, commercial check acc, retail deposit
I got the answer using the same formula but bb_ I used pd of non investment grade (above bbb_ rated investment grade)i was stumbled.. whether to consider BB- as investment grade or non investment grade when answering the risky loans question (X,Y,Z).. i used the formula Expected loss = (1-RR) * PD* Exposure and arranged the loans with respect to their Expected loss values.. did any one solve that question?
the question states that the marginal VaR will be the lowest AS LONG AS Treynor ratio is greater than 0.1
and you have no way out in calculating the marginal VaR by using those inputs provided by the question
for depeg, i choose bank with CHF deposit & GBP loan will suffer as CHF depreciateSome others coming to mind, apologies for the vagueness but maybe others can extend more detail:
And unless I am just forgetting about it, I was surprised to not see any Merton / contingent claim questions...
- CHF/EUR de-peg from January event and a complimentary graph I think I chose the answer where one currency will be more volatile going forward.
- Something regarding an OAS spread above the treasury curve +30 and below the Securities spot curve -30 bps, and the implications on security value or market perception.
- A question where you had to distinguish and/or choose between age/volatility/filtered/correlation weighted approaches.
- Four hedge fund strategies with similar market conviction, which would be least likely to be correlated with the others. For me it came down to short bias or market neutral, I chose the latter.
- Pick the answer which best describes "Pillar 3"
- I recall performing the ROE calculation for some reason, or I am imagining this lol.
There are others going through my head, but I am not sure if I am just blending them with past practice questions, it's becoming hazy at this point.
I will refrain from adding more questions I recall to this discussion, for my own sanity. The analysis I'm doing at this point is slightly driving me up the wall. I need to let go and know that worst case I did not make the cut, I can continue studies and be even more prepared and a better risk manager with deeper knowledge of the subject matter, which I found quite interesting especially for part 2. It would not be the worst fate. However, if I pass I will certainly miss all the learning and challenges that come with this curriculum. It can be an incredibly frustrating and painful journey, yet so uplifting and totally worth it when you experience each "Ah hah" moment and small victory along the way. Best investment of my time I ever made.
Thank you David and BT team, and I wish you all the very best of luck!
Ryan
for first question, i choose market neutralhow many questions could we gather until now? there is also a question on hedge fund strategy. which of the strategies has the lowest correlation with its (strategies) index.
And another question on "if correlation of the of assets in the pool increases what could result" I chose the CVAR decreases. I might be wrong.
among the answers
will decrease diversified var; decrease RAROC; decrease Sharpe Ratio; have 14 PC to account for 85% of variance
Me too. I dont have a concrete reasoning. To me rest of the strategies seemed to have similar strategies except for market neutral, I assume has high idiosyncratic factor. Might be wrong though.for first question, i choose market neutral